Wednesday, 3 January 2018

The demand for xEV battery in China sees significant growth in 2017
due to carmakers’ acceleration into electric vehicles production. The
global xEV battery demand expects a steady growth from 2 billion units
in 2017 to 2.5 billion units in 2018, a Y0Y increase of 24%, says
EnergyTrend, a division of TrendForce.

China’s rapidly expanding NEV market has driven the battery makers
to mainly focus on xEV batteries although IT products used to be the
main market of battery supply. Consequently, the price of cobalt, a key
material in battery cells, has been thriving up during the past year.
With the cost rising and the government’s subsidy decreasing, China’s
new energy vehicle (NEV) market may face potential risks for future
growth.

The price of cobalt has gone higher season by season in 2017 due to
the surging demand for batteries with the rapid development of NEV, says
Duff Lu, research manager of EnergyTrend. Lu does not expect the cobalt
price to keep rising in 2018, but it remains a key concern for the
supply chain. In long term, battery makers and vehicle manufacturers
will seek solutions, e.g. vertical integration, for secured supply to
prevent further large fluctuation in price that may impede the
development of the industry.

Enhanced energy density promotes the development of NMC battery market

Before 2017, the demand for xEV battery in Chinese market mainly
comes from buses with fixed routes and big sizes, for which the energy
density is not a top priority. So LFP batteries are mostly used for a
balance between cost and battery life.

In contrast, logistics vehicles and passenger vehicles use mostly
NMC battery. With supportive policies announced by the Chinese
government, the market penetration rate of new energy passenger vehicles
is expected to increase significantly in 2018, resulting in the growing
demand for NMC battery. Currently, the penetration rate of NMC battery
among passenger vehicles has increased from 50% in 2016 to 70% in 2017,
indicating its superior market share over LFP battery in the passenger
vehicles market.

The unit price of xEV battery will continue to decline as the energy
density of battery increases, says Duff Lu. As a result, the better
price-performance ratio will further promote the development of NMC
battery market.

Penetration of new energy passenger vehicles and logistics
vehicles increases, making them key players in the 2018 Chinese market

Considering the convenience of setting up charging stations and
maximizing the utilization of vehicles in the early-development stage of
China's NEV market, the introduction of NEV began from big buses and
then expanded to those of smaller size. Currently, the penetration rate
of small-size (6 to 8 m in length) and medium-size (8 to 10 m in length)
buses remains 27% while that of big buses (>10 m) is 20%.

In contrast, the development of electric passenger cars still stays
in an early stage, with a penetration rate of only about 3%, mainly due
to the high battery price and preliminary development of charging
facilities. In 2018, with the penetration expected to increase,
logistics vehicles and passenger vehicles will be the major driving
forces in China's electric vehicle market, while new energy buses tend
to have a more stable growth.